A Cautionary Irish Tale of Loan Sales By GSEs
Updated 03-26-2021 Really, I don't go out of my way to twist this knife, but I have just read the Tenth Interim Report the substance of which is that the final deadline has now been pushed out to September 30th, 2021. This was published on the 6th anniversary of my original article. As I have said before, NAMA did an outstanding job of cleaning up the Irish CRE NPL mess. The truth has become more apparent when compared against the efforts in Spain, Italy, and Greece which are still ongoing. But the lesson holds -- NAMA's later transactions were an exercise in near best market practices.
Update 07-17-2020 I originally wrote this piece 5 years ago. The Irish NPL Crisis V1.0 is done and dusted. V2.0 is on the horizon like an oncoming hurricane. And yet, a merry band of accountants continue to investigate Project Eagle. According to an article this week, the cost has now topped Euro2.5mm, and it continues to trundle on.
Update 01-30-2020 The inquiry into Project Eagle like a highschool production of "Waiting for Godot" continues on with the actors and audience waiting in agony for a curtain call that seems over the horizon. Of all of the bad banks established in Europe, NAMA stands out as the benchmark of excellent execution and maximizing proceeds to the tax payers in a timely manner.
Update 04-04-2019. I wrote the note below back in May of 2015. The inquiries into IBRC's and NAMA's sales still trundle on. Five years and the meter is still running. (For perspective, The Warren Commission investigating JFK's assassination took a year. The Mueller investigation into the 2016 election took two years.)
Original piece from 04-2015
Anglo Irish bank was nationalized by the Irish Government on January 21st, 2009 and then liquidated on February 7th, 2013. During this period, interim management was appointed which worked aggressively to wind down the bank’s troubled loan book and maximize proceeds to the government. For those four years, the consensus regarding the Irish economy was grim with many speaking of a decade required for a full recovery. No one forecast the “parabolic” 44.7% recovery seen in Dublin property in 2014 or Ireland’s European leading growth of GDP at 4.8%.
Now, with the benefit of hindsight, transactions executed during the dark years are coming under scrutiny by the Irish Government with a special commission being opened to examine all transactions where Anglo Irish/IBRC suffered a loss of €10 million or more--roughly 35 transactions. An accounting firm has reportedly been given a blank cheque to conduct the investigation.
Unless these sales were conducted in a transparent process supported by a secure, auditable technology platform, the task of assembling the necessary evidence will be difficult if not impossible. Files will have been lost, almost the entire staff are at different institutions, and memories are not perfect. It will be difficult to conclusively prove that a critical mass of buyers were contacted and given the same information. In all probability, much funds, time and emotions will be invested and the outcome will be inconclusive. KPMG has so far billed €76m for the IBRC liquidation, this exercise will have to be added to that sum.
Applying Boston’s current “deflategate” situation loosely to the banking world, the question then becomes who will become the Tom Brady who is taken out of commission for four games and the subject of public shaming?
The lesson of the story is that in the darkest hours, it is easy to forget that a day will come when the current expedient transactions will be reexamined. Open sales through an established platform not only offer the best proceeds at the time of the sale, they also are an added line of defense against later public scrutiny.